(CBS) If you’re one of the 50 million
Americans who has money deducted from his or her paycheck to pay for
disability insurance, or if you’ve purchased a disability policy on your
own, you may think you’re covered if you’re injured or too sick to work.
But don’t be too sure. Ed Bradley reports.

A number of
people who worked at UnumProvident, the giant of the disability insurance
business, whose clients include CBS, told us that the company’s management
puts tremendous pressure on claims handlers to deny new claims and shut
down existing ones. And that many UnumProvident policy holders- who are
obviously disabled – are left out in the cold.

UnumProvident is
the largest disability insurance company by far, providing disability
insurance to 17 million Americans. One of them was Dr. John Tedesco.
Today, Dr. Tedesco does part-time diagnostic work, but he used to be a
successful eye surgeon. Then, four years ago, he developed a tremor in his
right hand:

“I knew that if I tried to operate on somebody, I
might hurt them. I might blind them,” Tedesco says. So he stopped
operating.

For six years, Dr. Tedesco had paid for an insurance
policy that guaranteed him a decent income if he could no longer do
surgery. He filed a claim with UnumProvident, and the company paid his
claim for four months. Then a claims handler sent Dr. Tedesco a letter.

“Basically, the letter said ‘We’re cutting off your benefits. We
don’t think you’re disabled. And you’re not entitled to any benefits,’”
says Tedesco. As far as he knows, the company did not talk to his doctors.
Nor did they come to see him.

UnumProvident had a cameraman
secretly follow Dr. Tedesco for six days and shoot videotape. The company
said it showed Dr. Tedesco playing football in his backyard looking
anything but disabled. However, there was just one problem. It actually
showed his 23-year-old son.

Three years ago, Dr. Tedesco was
diagnosed with Parkinson’s Disease. He found he couldn’t keep his hands
steady enough to do routine eye exams, let alone surgery. Three physicians
said he was too disabled to operate. The company still didn’t start paying
him.

“It almost sounds ridiculous an insurance company refusing a
disability from an eye surgeon who has a hand tremor and Parkinson’s
Disease. How do you explain that?” Bradley asks Tedesco.

“I can’t
explain that. There’s not a person on this earth who would say that a
person with Parkinson’s Disease could do eye surgery,” Tedesco says.

What happened to Dr. Tedesco came as no surprise to the
UnumProvident employees we spoke to. Diane McGinnis started working at
UnumProvident three years ago. When Bradley interviewed her she was
working as a claims handler at the company’s headquarters in Chattanooga.
She says that the company told its workers they had to shut down enough
claims to meet monthly targets in the millions of dollars.

“At the
beginning of each month the projections would come down from the directors
or above, who would give a number as to the amount of money we would have
to come up with at the end of the month in closures,” she says.

Bradley: These were like targets you had to meet?
McGinnis: Right Bradley: And did the people who set
the targets know that there were a certain number of claims that deserved
to be terminated before they set the target? McGinnis: I don’t
think it was about whether they deserved to be closed. They had to be
closed. They needed to make those projections. Bradley: So you
would go into these meetings once a month with a target, a dollar figure,
which you had to save the company and that dollar figure had nothing to do
with the validity of the claims that were out there. It had nothing to do
with the legitimacy of the claims that were out there?
McGinnis: Right. The claim reps would go looking for claims
that they could shut down and the consultants would be right behind them
helping them go through files to look for those numbers that they needed.
Bradley: And did the claims handlers ever shut down claims that
they knew were legitimate in order to meet a monthly target?
McGinnis: Yes, many times that’s happened, many times.
Bradley: You say that without any hesitation.
McGinnis: Because I’ve seen it for three years.

UnumProvident declined to talk to 60 Minutes on
camera, but top executives repeatedly denied that the company sets any
targets whatsoever for saving money by closing claims. The executives also
told us the company processes 400,000 claims a year and occasionally makes
a mistake, which, they say, UnumProvident is quick to remedy once the
company is aware of it.

As for Diane McGinnis, she resigned eight
weeks ago. UnumProvident questions her integrity, citing several instances
of dishonesty in her personal life. But more than a dozen current and
former UnumProvident employees, including former vice presidents of the
company, confirmed some or all of McGinnis’ allegations.

Angelique
Brackett was a claims handler in the company’s headquarters in
Chattanooga.

“About the middle of the month, they’d let us know if
we were on track to meet our dollar amount for the month, and if we
wouldn’t, they’d really start pushing us to find more or to get the ones
we thought we could get closed,” she said.

Gina Hartley worked for
five years as a claims handler in the company’s headquarters. She resigned
a month ago.

Bradley: And if they would say to us that
there were no targets, no money targets that we were aiming for each
month, you would say… Hartley: It was well known to each
individual, each one of us and to every department. It was standard, I
mean day in day out there were targets. There were goals.
Bradley: So you’re saying the company is lying?
Hartley: That’s what I’m saying. Bradley: and were
these targets just suggestions or guidelines? Hartley: oh no it
was set. I mean this is the amount. We were given the exact dollar amount
that we were targeting, and toward the end of the month, if we were far
behind, we would what’s called a blitz in the orthopedic area where
everybody would come in on Saturday and we’d go through our claim files.
If they’d been gone through 20 times and reviewed 20 times by managers,
consultants, we would still go through our claims, our co-workers claims,
other department’s claims, trying to find something that might just – even
if was a technicality – something we could close that claim on. And the
pressure on the claims representatives was so intense that we felt we had
to go in to close that claim. Bradley: You knew of people who
were really disabled and their claims were terminated because in
terminating those claims UnumProvident would save money.
Hartley: Oh yes, oh yes Bradley: No doubt about it?
Hartley: No doubt about it. Bradley: And did your
supervisors know that you were terminating legitimate claims?
Hartley: They had to give the approval to, before we could. As
a claims handler, we did not have the power or the authority to close the
claim ourselves. It had to be signed off on by our consultant and our
manager. Bradley: And how much money are we talking about. What
were they looking to shut down every month? Hartley: Anywhere
from 7 to 14 million. If another department needed help, they would bump
it up to 14 million a month.

UnumProvident told us the claims
handlers had no financial incentive to terminate the claims of disabled
policyholders. Michelle Payne, a former administrative assistant, says
that’s not true:

Michelle: The ones that knew how to do
what was asked of them, they’re the ones that got the bonuses.
Bradley: And what was asked of them? Michelle: Close
the claims. Bradley: You say that without any hesitation.
Michelle: I saw it on a daily basis. Hartley: there
were staff meetings that we sat in and the manager would say so and so
just closed 2 million claim today and everybody would give them a hand and
2 or 3 weeks later, low and behold, that person would end up being
presented with a bonus, a check, money.

It wasn’t just claims
handlers who were under pressure to deny claims:

“I saw the same
thing,” says Dr. Fergal McSharry worked for UnumProvident for nearly two
years as an in-house physician reviewing disability claims. Dr. McSharry
says the company pressured him and other doctors to go along with the
claims’ handlers decisions to terminate claims:

McSharry:
The decision was nearly always made and we were to not upset the apple
cart and give this opinion which was contrary to everybody else’s.
Bradley Didn’t the company give you the option to request more tests,
more medical information about the claimant? McSharry: Yes, the
option was there, but whenever I did it I got into trouble. Bradley:
why would that get you in trouble? McSharry: It would blow the
target way back, and the team were very dependent on me as the physician
to support their achieving the goal. Bradley Of meeting that target,
the dollar figure? McSharry: Yeah, so I was getting a lot of
upset people coming into my office saying: “You’re not helping us, doc!”

At first, Dr. McSharry says he did change his medical opinion once
or twice to please his supervisor. Then, he decided he could no longer do
that. Six months ago, UnumProvident fired Dr. McSharry. He is now suing
the company for ‘wrongful termination.”

Bradley: Unum
Provident says that the issue with you was productivity; that you were
slow to sign off on your claims. McSharry: I wouldn’t sign off,
yes. I wouldn’t. I refused. Bradley: Were other doctors in the
claims department pressured to sign off on terminations?
McSharry: We all were. And some doctors did and some doctors
didn’t. Hartley: We knew what doctors to send it to and what
not to. If we wanted that claims closed, we’d send it such and such
doctor.

Closing those existing claims – or denying new ones - has
led to nearly 3,000 lawsuits against UnumProvident in the past five years.
Gina Hartley says the company’s lawyers warned claims handlers to be extra
careful about denying claims in certain states:

Hartley: We
would get guidance as far as what state you might be able to close this
claim in. That may not give us trouble in the courts. What state would be,
okay this is a tougher state, they’ve strong insurance commissioners,
they’ve got strong courts, they’ve got courts that favor the insured.
Better not mess with this one too much. Bradley: Tell me what
you think the philosophy of this company is: Hartley: Their
philosophy was close it if you can close it. If there was any way possible
to close it. That was the bottom line. Garamendi: Every
insurance department in this nation ought to be taking a hard look at this
situation

Last week, John Garamendi was re-elected to head the
California Department of Insurance.

Bradley: How can an
insurance company decide in advance the percentage of claims that should
be terminated? Garamendi: How can they? Well, they can if they
want to break the law, if they want to go against the normal practice, and
if they want to get big lawsuits. It is not the thing to do.
Bradley: Provident’s adjusters appear to be under pressure to
increase terminations. Garamendi: Exactly. Bradley:
On the face of it, what’s wrong with that. Garamendi: This kind
of thing will lead to problems. It’ll lead to fraud by the insurance
company against the consumer, against the policy-holder.
Bradley: Do you see a pattern here? What does it say about this
company? Garamendi: There’s been successful lawsuits against
this company in which federal courts by unanimous verdicts have issued
punitive damages for this kind of activity. That’s another, not a warning
sign, that’s a clear siren out in the streets saying ‘What is going on
here.

Tedesco, the eye surgeon with Parkinson’s Disease, sued the
company, and a jury awarded him 36 million dollars. To avoid a lengthy
appeal, Dr. Tedesco settled with UnumProvident for an undisclosed sum.

Bradley: If this company knows that they’re going to be hit
with these lawsuits and they’re going to lose some of them, that there’s
going to be bad publicity, why would they do this?

Garamendi: It’s an equation, an economic equation. How many
will we lose? How much business will we lose? Versus how much will we gain
by denying these claims. So they’re doing that economic equation and
they’re saying, “We’ll run the risk of the lawsuits. We’ll run the risk of
the bad publicity, and probably the departments of insurance are asleep
anyway. So let’s go!”

While the great majority of lawsuits against
UnumProvident are settled out of court, and the company says it wins most
of those that do go to trial - this week it lost a big one. A federal
court in San Francisco upheld a $7.5 million judgment against
UnumProvident saying it showed bad faith in targeting a claim for closure,
and that it employed biased medical examiners and improperly destroyed
medical and other reports. The court issued an injunction ordering the
company to stop those practices.